Financial spread betting is a flexible way to trade the financial markets without holding the investments directly in your hands it is a margined (leveraged) investment vehicle allowing investors to trade and speculate on the financial markets. Private investors open thousands of Financial Spread Betting accounts a month to take the advantage of the current tax policy (Financial Spread Betting is CGT and income tax free). Spread Betting has experienced a big grow in the last few years and the competition between companies has become vigorous to attract new customers by offering tighter spreads and better customer service.
Financial Spread Betting is also free from stamp duty and UK residents do not pay CGT (Capital Gains Tax) along with the other advantages making the spread betting the fastest growing leveraged product in the UK.Placing a spread bet gives you an instant access to the price of the financial markets, allows you to take long or short positions without the stockbroker's interference and offers you to trade all the different financial markets (equities, individual shares, commodities, currencies, and bonds) from a single account. Unlike traditional share dealing and CFDs where you have to pay a commission for every transaction, in Financial Spread Betting the commission is built into the spread (difference between 'bid' and 'offer').
When you spread bet, you do not buy shares or commodities but instead you make a bet as to which way you think the market or share price will move. You can bet per penny or point movement - the amount you wish to bet is known as the 'stake', and can be as little as £1 per point. It is important to understand that £1 bet on shares represents 100 shares (how many shares do you need to buy to make £1 if the share price goes up 1 penny? 100 shares).
Financial Spread Betting, just like Contract For Difference, is a margined product, thus only small deposits are required to open a new position (with some Spread Betting companies £30 is enough to open £1 FTSE100 position, refer to Spread Betting comparison). Once you have chosen the market on which you wish to bet, you can bet the stake of your choice (each market has its own min and max allowable stake), which will represent your profit or loss per point movement in that market. For this reason you must be aware that your losses (just like profit) can increase dramatically if the markets move substantially in the opposite direction to your bet.
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